Six weak banks get cash prop

New Delhi: Six weak public sector banks will get Rs 7,577 crore as part of the government's recapitalisation plan to boost their capital adequacy ratios. The funding comes under the government's Indradhanush plan, which promised to infuse Rs 70,000 crore over a period of four years ending March 2019.

All these banks to get capital support are under prompt corrective action of the Reserve Bank of India.

The lenders, which will receive the capital through the preferential issue of shares, include Bank of India, IDBI Bank and Uco Bank.

The actual cash infusion will take place in the next few weeks after they get the necessary regulatory approvals, including shareholders' nod.

Uco Bank, in a regulatory filing on Wednesday, announced the board approval for the proposal to issue equity shares on a preferential basis to the government against a capital contribution of Rs 1,375 crore, subject to necessary approvals.

Besides, the Central Bank of India said the capital raising committee of the board approved the raising of equity capital by allotting up to 3.88 crore shares at the issue price of Rs 83.15 per unit aggregating Rs 323 crore.

The government has decided to infuse Rs 2,257 crore in the Bank of India, Rs 2,729 crore in IDBI Bank, Rs 650 crore in Bank of Maharashtra, and Rs 243 crore in Dena Bank.

While the government is deliberating on the mode of recapitalisation for all state-run banks, it advanced the release of funds to these six banks to help them meet their equity requirements, resume normal business and come out of prompt corrective action.

In October, finance minister Arun Jaitley had announced an unprecedented Rs 2.11-lakh-crore two-year road map to strengthen public sector banks, reeling under high non performing assets (NPAs) or bad loans. Their NPAs have increased to Rs 7.33 lakh crore as of June 2017 from Rs 2.75 lakh crore in March 2015.

The plan includes floating recapitalisation bonds of Rs 1.35 lakh crore and raising Rs 58,000 crore from the market by diluting the government's stake.

The government is working on the modalities for issuing the recapitalisation bonds as it aims to front-load the infusion in order to strengthen the state-owned banks, sources said, adding that an announcement will be made during this month.

Under the Indradhanush road map announced in 2015, the government had announced an infusion of Rs 70,000 crore in state-owned banks over four years, while they will have to raise another Rs 1.1 lakh crore from the market to meet their capital requirement in line with global risk norms, known as Basel-III.

In the last three-and-a-half years, the government had pumped Rs 51,858 crore into PSU banks. The remaining Rs 18,142 crore will be injected over the next two years.


Back to top icon